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Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D

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  • Julien Daubanes
  • André Grimaud
  • Luc Rougé

Abstract

We borrow standard assumptions from the non-renewable-resource-taxation and from the directed-technical-change literatures, to take a full account of the incentives to perform R&D activities in a dirty-resource sector and in a clean-resource-substitute sector. We show that a gradual rise in the subsidies to clean R&D activities causes a less rapid resource extraction, because it enhances the long-run resource productivity. Our result contradicts the green-paradox conjecture that technical improvements in resource substitutes accelerate resource extraction. Sector-specific innovation activities are tantamount to competing economic projects; general equilibrium with several R&D sectors implies no-arbitrage conditions that give rise to not-so-intuitive results.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4334.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4334

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Keywords: non-renewable resources; directed technical change; green paradox; environmental policy; R&D subsidies;

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References

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  1. GRIMAUD Andre & LAFFORGUE Gilles & MAGNE Bertrand, 2009. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," LERNA Working Papers 09.20.296, LERNA, University of Toulouse.
  2. Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
  3. Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
  4. Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
  5. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
  6. Aghion, Philippe & Dechezleprêtre, Antoine & Hemous, David & Martin, Ralf & Van Reenen, John, 2012. "Carbon Taxes, Path Dependency and Directed Technical Change: Evidence from the Auto Industry," CEPR Discussion Papers 9267, C.E.P.R. Discussion Papers.
  7. Withagen, C.A.A.M., 1994. "Pollution and exhaustibility of fossil fuels resource," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3107033, Tilburg University.
  8. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo, vol. 57(1), pages 79-102, March.
  9. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  10. GRAFTON, R. Quentin & KOMPAS, Tom & LONG, Ngo Van, 2011. "Substitution between Biofuels and Fossil Fuels: Is There a Green Paradox?," Cahiers de recherche 10-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  11. Karen Pittel & Lucas Bretschger, 2010. "The implications of heterogeneous resource intensities on technical change and growth," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1173-1197, November.
  12. repec:dgr:uvatin:2010020 is not listed on IDEAS
  13. Joshua S. Gans, 2012. "Innovation and Climate Change Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 125-45, November.
  14. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  15. Cozzi, Guido & Giordani, Paolo E. & Zamparelli, Luca, 2007. "The refoundation of the symmetric equilibrium in Schumpeterian growth models," Journal of Economic Theory, Elsevier, vol. 136(1), pages 788-797, September.
  16. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer, vol. 15(4), pages 360-394, August.
  17. Grimaud, André & Rougé, Luc, 2007. "Environment, Directed Technical Change and Economic Policy," IDEI Working Papers 384, Institut d'Économie Industrielle (IDEI), Toulouse.
  18. Sjak Smulders & Corrado Di Maria, 2012. "The Cost of Environmental Policy under Induced Technical Change," CESifo Working Paper Series 3886, CESifo Group Munich.
  19. Gaudet, Gérard & Lasserre, Pierre, 1990. "Dynamiques comparées des effets de la taxation minière," L'Actualité Economique, Société Canadienne de Science Economique, vol. 66(4), pages 467-497, décembre.
  20. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.
  21. Julien Daubanes & Pierre Lasserre, 2012. "Non-Renewable Resource Supply: Substitution Effect, Compensation Effect, and All That," CIRANO Working Papers 2012s-28, CIRANO.
  22. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
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Cited by:
  1. Frederick van der Ploeg & Cees Withagen, 2013. "Global Warming and the Green Paradox," OxCarre Working Papers 116, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  2. Grimaud, André & Neubauer, Mauricio & Rougé, Luc, 2013. "Politiques de R&D, Taxe Carbone et Paradoxe Vert," IDEI Working Papers 806, Institut d'Économie Industrielle (IDEI), Toulouse.

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